Four Days Left Until Ruth's Hospitality Group, Inc. (NASDAQ:RUTH) Trades Ex-Dividend
Ruth's Hospitality Group, Inc. (NASDAQ:RUTH) stock is about to trade ex-dividend in 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Ruth's Hospitality Group's shares before the 9th of March to receive the dividend, which will be paid on the 24th of March.
The company's next dividend payment will be US$0.16 per share, and in the last 12 months, the company paid a total of US$0.64 per share. Based on the last year's worth of payments, Ruth's Hospitality Group stock has a trailing yield of around 3.4% on the current share price of $18.72. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for Ruth's Hospitality Group
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Ruth's Hospitality Group's payout ratio is modest, at just 46% of profit. A useful secondary check can be to evaluate whether Ruth's Hospitality Group generated enough free cash flow to afford its dividend. The company paid out 90% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want to look more closely here.
Ruth's Hospitality Group paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Ruth's Hospitality Group to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Ruth's Hospitality Group, with earnings per share up 3.9% on average over the last five years. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Ruth's Hospitality Group has lifted its dividend by approximately 15% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Final Takeaway
Should investors buy Ruth's Hospitality Group for the upcoming dividend? Ruth's Hospitality Group delivered reasonable earnings per share growth in recent times, and paid out less than half its profits and 90% of its cash flow over the last year, which is a mediocre outcome. All things considered, we are not particularly enthused about Ruth's Hospitality Group from a dividend perspective.
However if you're still interested in Ruth's Hospitality Group as a potential investment, you should definitely consider some of the risks involved with Ruth's Hospitality Group. Our analysis shows 1 warning sign for Ruth's Hospitality Group and you should be aware of it before buying any shares.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
